A Charlottesville/Albemarle Area RE Blog tracking the market's Boom Bubble Bust Bounce, from 2008 to 2013. The second half of 2010 saw a steep downward spiral in sales; 2011 saw sales volume at 13 yr lo with prices dropping each Quarter. 2012 began with even lower prices which resulted in an uptick in Y/Y sales, and mid-2012 saw "Carpe Diem" trumping "Caveat Emptor." 2013: Booming. Are we a "Protected Market" once again? Time will tell.
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Tuesday, October 5, 2010

"The New Normal" - Part II - Major Banks Halt Foreclosures in 23 States; Other Lenders Ordered to Review Processes in Widespread Allegations of Fraud

The "New Normal" in housing? Expect unanticipated consequences.

In the Charlottesville / Albemarle area and surrounding counties, bank-owned foreclosures typically sellquickly, within a few days of listing (especially single-family homes), because they are usually 10% - 50% less than privately-owned "comps." But:

What if the house is foreclosed...and then the mortgage holder discovers the bank didn't have a clear right to evict?

What if a new buyer purchases a foreclosure...and then discovers that the bank didn't have clear title to sell it?

This is exactly the scenario that is playing out--and will continue to do so for years, in a scandal brought to the American people by big banks.

JP Morgan Chase, Bank of America, and Ally Bank (formerly GMAC, General Motors Acceptance Co., primarily owned now by Uncle Sam, have all halted foreclosures in 23 states because the legal professionals signing off on the foreclosure packages were giving signatures to so many thousands that they didn't bother to read them, and are alsounable to produce complete documentation to prove ownership.

Other major banks ordered by the Office of the Comptroller of the Currency to review procedure include Citibank, HSBC, PNC Bank, Wells Fargo, and US Bank.And as a consequence, some major title insurance companies will no longer offer their services to foreclosure purchases.

"There is a potential for class action liability in the United States for billions and billions of dollars on behalf of homeowners who lost their homes in proceedings where lenders used these kinds of phony documents."

Even without massive lawsuits, the suspension was bound to damage the already fragile financial market and housing industry, [mortgage broker] Moskowitz said.

"It is going to encourage people who are in default already to drag it out. In most of the cases it means they will have to start the process again, even though actually speaking, they defaulted," he said.

"This isn't healthy for the market. It is unhealthy for the real estate market because the values are artificially high because all the foreclosures are not on the market yet."

"It is bad for the finance market because the lenders can't get their money for years. The losses for the banks will be much bigger."

Mark your calendar, because the housing "recovery" has just been set back several years.

Related Reading:

See current foreclosure offerings (caveat emptor, as is always the case)here and here and here.

Virginia has two kinds of foreclosure: Judicial, and Right to Sale. Read

7 comments:

AliG
said...

Any idea what this means for home prices? If the foreclosure process is held up, will that delay or even reverse a return of pricing to historical norms, since foreclosure sales has been one of the drivers for lower housing prices?

Foreclosures were leading the way in "accurately" valuing home prices--even in this area. As the process is now suspended, not only is there still a huge overhang of inventory (more so here than elsewhere), but the price reversion is interrupted.

Read Ritholtz on the problems facing the entire housing industry due to this:

"We are not discussing economic problems of too many homes for sale and falling prices. What is being discussed here is a full blown crisis underlying home titles, foreclosure procedures, and securtized mortgages. The rampant, epidemic and systemic abuse of legal property protections is now reaching a crisis."

looks about right to me. That house needs to be completely gutted not to mention that it is fugly. It's called depreciation. Homes in the city will learn what this is about- look at sales volume now imagine where prices need to be in order to have volume at a 2002 pace. You can apply that anywhere really.

The smart ones will begin to drop their numbers dramatically to attract the small pool of qualified buyers, before the market drops down to the next pool of buyers. We will see steep declines over the next 18-24 months.

Every day the house doesn't sell it's worth less in this market. Sellers should be in a panic and their agents should get them to that state. Except many agents heads are still in the great dark place. New construction on a decent size costs less than the existing sh*t currently offered, which is priced to cover the seller's a$$. Pain now rolling through this market like a steamroller.

Va. Housing Development Authority market data for the local Realtors Assn. indicates rising foreclosures, declining prices, then "correction" at least 12 months away.Comparisons: See Current Median Home Prices in Cville, Alb, other parts of VA, and 20 other markets.

Home prices likely lower in 2011, in 85% of the United States' 381 metropolitan areas - PMI Group. Includes graphs.VP Biden - We "Misread the Economy" - VideoThe number of foreclosures keeps rising because mortgageholders can't afford the modifications. Read the data.

Halsey Minor, King of The Tyvek Tower, is being sued not just by contractors, but by the funding bank. TheLandmark Mess continues. City claims it will not bail out the blight on the landscape and a real contrast to the $7.5 million in bricks at the base of the steel girders.